EchoStar Affiliate Gains FCC Licenses

8/19/2004 8:51 AM Eastern

By: By Ted Hearn

An affiliate of EchoStar Communications Corp. was granted federal licenses Thursday to provide video programming and high-speed data in dozens of markets, sharing a slice of the airways heavily used by direct-broadcast satellite carriers.

South.com LLC, which is nearly one-half-owned by EchoStar, bid $27.7 million in a Federal Communications Commission auction in January to obtain 37 licenses, covering markets in Boston; Dallas; Washington, D.C.; and Atlanta.

All but 22 of the 214 multichannel-video and distribution and data service (MVDDS) licenses were sold, reaping the U.S. Treasury $118.7 million. Winners have five years to launch their systems, which are expected to provide competition to cable and DBS operators.

The FCC has granted every license except one: DTV Norwich LLC, an affiliate of Cablevision Systems Corp., has not received its New York City license, for which it paid an auction-topping $24.2 million.

According to industry and FCC sources, DTV Norwich is ineligible to hold the license because the FCC barred the cross-ownership of an MVDDS license and a cable system in the same local market. Cablevision is the dominant cable company in the New York market, with about 2.9 million subscribers.

However, the cross-ownership problem is expected to be resolved once Cablevision spins off Rainbow DBS in September. Rainbow DBS is the Cablevision entity that made the investment in DTV Norwich.

DTV Norwich paid $84.6 million for 46 licenses, having pursued a big-market strategy that netted spectrum rights in New York, Los Angeles, Chicago, Philadelphia and San Francisco.

Northpoint Technology Ltd. sought all of the MVDDS licenses free-of-charge, saying it deserved exclusive spectrum rights because it developed the spectrum-sharing technology. The FCC rejected that request, prompting Northpoint to file an appeal in a case that won’t be heard until next year.

Ironically, EchoStar is also appealing, claiming that the MVDDS service would create harmful interference and blur satellite-TV reception in millions of DBS homes.